Overview
- Wes Streeting proposed on Thursday that capital gains tax be aligned with income tax bands at 20%, 40% and 45%, saying the change would be a “wealth tax that works” and could raise about £12 billion a year.
- Under his plan an individual’s CGT band would be set by combining their income and gains, and Streeting said lower rates or carve-outs would protect genuine entrepreneurs while loopholes that let people reclassify pay as gains would be closed.
- HM Revenue & Customs modelling and several tax commentators have warned that lifting CGT could instead reduce receipts in realistic scenarios, citing analyses that a 10 percentage point rise in the higher rate could cut billions from revenues.
- Analysts also say higher CGT risks shifting behaviour by delaying asset sales, encouraging ‘hold until death’ strategies, increasing use of tax wrappers or prompting capital flight, which could blunt any revenue gains and weaken investment.
- The proposal is part of Streeting’s positioning for a Labour leadership contest after his cabinet resignation, and commentators note it builds on past calls to equalise CGT but that workable reform typically requires measures such as indexation or a rate‑of‑return allowance to protect real investment.